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TMI Blog1966 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Inspector of Factories for working the factory was obtained in June, 1958. The statement of the case further mentioned that the time given to complete the project was extended by the Government up to 17th March, 1959. The respondent was assessed to wealth-tax for the assessment year 1957-58, and in that year the respondent claimed that, in computing the wealth on the valuation date which was 30th September, 1956, an amount of Rs. 1,43,727 should be deducted as being the amount laid out in setting up this new unit. The Wealth-tax Officer disallowed the claim on the ground that the unit was set up prior to the date on which the Wealth-tax Act (hereinafter referred to as " the Act ") came into force, i.e., 1st April, 1957. On the same basis, the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld that order. Thereupon, at the request of the respondent, the following question of law was referred for the opinion of the High Court of Madras : " Whether the aforesaid asset of Rs. 1,43,727 is exempt under section 5(1)(xxi) read with the second proviso thereunder of the Wealth-tax Act ? " The High Court answered the question in favour of the respondent, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained from the Government for constructing the machinery, are merely initial stages towards setting up, however necessary and essential they may be to further the achievement of the end. It is not, however, the actual functioning of the factory or its going into production that can alone be called setting up of the factory. The setting up is perhaps a stage anterior to the commencement of the factory. Thereafter, the High Court referred to a decision of the Bombay High Court in Western India Vegetable Products Ltd. v. Commissioner of Income-tax, and, on its basis, concluded that the proper meaning to be assigned to the expression " set up " in section 5(1)(xxi) would be " ready to commence business ". We are unable to agree with the learned counsel for the Commissioner that, in arriving at this view, the High Court committed any error. A unit cannot be said to have been set up unless it is ready to discharge the function for which it is being set up. It is only when the unit has been put into such a shape that it can start functioning as a business or a manufacturing organisation that it can be said that the unit has been set up. The expression used in the proviso, under which th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the claim put forward by the respondent for exemption has been rightly held to be allowable by the High Court. In the statement of the case and in its appellate judgment, the Tribunal did not specifically record any finding as to the date when the unit was ready to go into business and to start production. In the appellate order, it was mentioned that, according to the respondent, the unit was set up only when the Inspector of Factories issued a licence to the respondent for working the factory, which was in June, 1958. In the statement of the case, the facts recited show that the construction of the factory buildings was completed by December, 1957, and the erection of the spinning machinery and plant was completed in several stages commencing from June, 1957. On these facts, the High Court, and we consider rightly, proceeded on the basis that the unit was completed and became ready to go into business only after 1st April, 1957, when the Act had already come into force. Consequently, the condition laid down in the principal clause of section 5(1)(xxi) was satisfied, and the company became entitled to exemption in respect of the value of the assets used up in setting up this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the unit, and placing of orders with manufacturers of machinery and advancing of moneys towards the purchase of machinery. " The Tribunal also disallowed the claim on the basis that the respondent commenced operations for setting up the unit earlier than 1st April, 1957. It does not appear to be necessary for us to express any opinion as to the particular stage at which it can be said that a company commences operations for the establishment of a unit. In the present case, the Tribunal proceeded on the basis that, whatever be the exact date of commencement of the operations for establishment of this unit by the respondent, it was certainly before 1st April, 1957 ; and we consider that that fact, by itself, is sufficient to entitle the respondent to claim the exemption. The Commissioner cannot, at this stage, be allowed to raise a new question and ask this court to decide that the date of commencement of the operations for establishment of the unit by the respondent was different from that accepted by the Tribunal. That question was not raised and dealt with by the Tribunal. It is not even a question that might have been raised before the Tribunal and the Tribunal might have faile ..... X X X X Extracts X X X X X X X X Extracts X X X X
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